Sticking with Tory tax cuts leaves little for Kinew to improve lives of those with least

Hey there, time traveller!
This article was published 05/03/2024 (600 days ago), so information in it may no longer be current.

One of the biggest challenges the NDP faces as it brings down its first budget next month is how to reverse the income inequality that was created from the massive tax cuts announced last year.

The former Tory government unveiled almost $1 billion in tax relief in its 2023 budget, some of which kicked in on Jan. 1. The NDP has vowed to keep those tax cuts and added one of its own, a temporary fuel tax holiday.

The province shouldn’t have much trouble finding the cash to pay for all this relief. Ironically, the cost of reducing income tax rates and giving property owners rebates on their tax bills is about equal to the record boost in transfer payments from the federal government this year. Manitoba is getting almost $1 billion in extra equalization, Canada Health Transfer and Canada Social Transfer money. That cash is supposed to be used for front-line services and other public goods. This year it’s all going to tax cuts.

So what’s left for front-line services and poverty-reduction strategies? Not much.

Premier Wab Kinew announced Monday his government will bring down its first budget on April 2, almost six months to the day after winning the Oct. 3 provincial election. The NDP has already confirmed it will keep the tax cuts announced by the previous government, including income tax reductions and education property tax rebates. Together, they add up to nearly $1 billion in 2024.

They also benefit higher-income Manitobans the most. Which means the gap between the rich and the poor in this province is about to widen further. That’s bad news in a province that, effectively, has the highest child-poverty rate in the country at 24 per cent (essentially tied with Saskatchewan at 24.2 per cent). The national average is 15.6 per cent.

The income tax cuts announced by the Tories last year will cost the provincial treasury an estimated $486 million annually. That will grow over time. The tax-cut package includes raising the basic personal amount to $15,000 from $10,855, implemented last year. Income-tax thresholds were also sharply increased, effective Jan. 1, 2024. Under the changes, high-income earners will save almost three times as much as lower-income Manitobans.

Someone earning $100,000 in 2024, for example, will save $1,399 from the changes, compared with $470 for a $30,000 earner.

Those lopsided benefits apply to education property tax cuts, too. The Tories increased the education property tax rebate last year to 50 per cent from 37.5 per cent. The NDP promised during the election campaign that it would keep the rebate.

It would be easy for them to eliminate or reduce it. Unlike the income tax cuts, which are already in effect, the education property tax rebate is a remittance that could be easily changed. And it should be. The rebates benefit high-income Manitobans the most. The higher the assessed value of one’s property, the bigger the rebate.

The education property tax rebate cost the provincial treasury an estimated $453 million in 2023. That figure will rise every year as tax bills grow — money that could be used elsewhere for more pressing needs.

Most people living in poverty don’t own property, which means they get no benefit at all from the education property tax rebate. In fact, they will fall further behind. Look around and ask yourself if redistributing wealth in this manner is good policy right now.

The NDP government could announce measures in the 2024 budget to address poverty. It has already unveiled a school meal program projected to cost $30 million a year. That’s an important move that will go a long way towards addressing food insecurity. But it’s a small step. Far more is needed to address Manitoba’s growing income gap.

Trouble is, where would the money come from to pay for it if government is slashing taxes by $1 billion?

Since federal transfer increases will be used to pay for tax cuts and Manitoba’s economy is expected to grow by less than one per cent in 2024 (resulting in little growth in own-source revenues), there won’t be much cash lying around for anything beyond inflationary increases to existing budgets.

Meanwhile, the provincial government is still operating in the red with a projected deficit of $1.6 billion in 2023-24. That shortfall is expected to shrink by the time Finance Minister Adrien Sala tables his first budget (it was likely inflated to begin with). And the projected deficit for 2024-25 will almost certainly drop below that.

But the reality of a $1-billion tax cut remains: there won’t be much fiscal room left to support those with the greatest needs. There’s something tragic about that, given the amount of distress and hopelessness in society these days.

tom.brodbeck@freepress.mb.ca